Indonesia turmoil squeezes Singapore retail margins

Currency volatility, inflation, and political risk are hitting Singaporean consumer-facing businesses the hardest.

Indonesia’s political transition under President Prabowo Subianto is creating economic headwinds that are being felt beyond its borders—particularly by Singaporean companies operating in the country’s retail and consumer goods sectors.

With the rupiah plunging to a 25-year low and markets slumping, investor sentiment has soured, triggering concerns over fiscal discipline, capital flight, and business stability.

“The Indonesian currency has taken a serious hit, and that's not positive news for Singaporean businesses… rent, salary, supplies—they all are going to get more expensive in Indonesia,” said Ashutosh Awasthi, Director at Kadence International Singapore. “Inflation and taxes are also biting, and it will keep getting harder and harder to keep prices competitive for Singaporean businesses and such, and will also hit the margins they are earning currently.”

Awasthi said the retail and consumer goods sector is particularly exposed. He warned that with discretionary spending declining, lifestyle and retail brands will likely see a drop in foot traffic alongside rising costs. “Add in supply chain hiccups and rent inflation, and that's a perfect recipe for squeeze margins,” he said.

To remain resilient, Awasthi urged Singaporean companies to adopt what he called an “anti-fragile” approach—becoming stronger amidst volatility, rather than just surviving it.

“For me, two strategies can work for them. One is to look smart… the more companies rely upon local supply chains and local resources, the lesser they'll get hit by the external shocks,” he said. “It’s also about reducing dependency on imports and exports, which can be expensive and not so profitable in such a situation.”

“The second strategy is collaborating with local businesses, which gives you on-ground insights and access to local networks… local partners can help you navigate regulatory hurdles and mitigate the impact of shifting policies,” Awasthi added.